City ratings mostly safe

Published 11:09 pm Thursday, July 21, 2011

A congressional stalemate over the federal debt ceiling could have a trickle-down effect on Virginia but is unlikely to harm Suffolk’s newly boosted credit rating, city Budget and Strategic Planning Director Anne Seward said Wednesday.

Federal lawmakers have been battling on Capitol Hill for weeks over the federal debt ceiling, hashing it out on issues since as the federal deficit, tax cuts, entitlement programs and more.

Failure to come to a deal could result in the nation defaulting on its loans.

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The ripple effect from such an event would range far and wide, and the state of Virginia has been put on notice that it could catch some waves.

State officials learned Tuesday that Moody’s, a credit rating agency, put Virginia and four other states on a credit watch list because of, at least in Virginia’s case, its heavy reliance on federal funding and the number of federal employees who live here.

“We’re furious,” Gov. Robert McDonnell said Tuesday. “If they don’t (get a deal) not only will it be embarrassing, but it will create an international financial crisis, and Virginia and our four sister states are going be the first ones to be a victim.”

Seward said Suffolk’s credit rating is unlikely to be affected no matter what happens in Washington, D.C., because the city has not received financing through the Virginia Resources Authority recently.

“We haven’t been that route in a couple of years,” she said, explaining that a near-default by the Southeastern Public Service Authority in 2009 caused many municipalities to be more cautious about using the Virginia Resources Authority, which was SPSA’s largest creditor.

However, she added, since Suffolk, like any municipality, receives a substantial amount of state funding, there is the possibility of an indirect ripple effect.

Two credit rating agencies, Fitch Ratings and Standard & Poor’s, last month boosted the city’s credit rating to AA+, just one notch below a pristine AAA rating. Moody’s maintained its prior Aa2 rating.

The changes are expected to save the city millions in interest payments over the life of its loans.